Country Garden Holdings said it is doing its best to raise cash and repay holders of its local-currency bonds and avert a default, after a multi-year housing slump damaged confidence, home sales and cash flows.
The distressed developer did not pay the 96 million yuan (US$13.3 million) annual coupon on Tuesday to holders of a March 2026 bond as the fund “is not fully ready,” it said in a reply to the Post. The company has not yet defaulted on the note, which has a 30-day grace period, it added.
Country Garden raised 2 billion yuan at 4.8 per cent annual interest from the bond sale in March 2021, one of the securities in the group’s 102 billion yuan worth of bonds owed to local and foreign investors at the end of June 2023, according to its interim report published in September.
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Boom, bust and borrow: Has China’s housing market tanked?
Boom, bust and borrow: Has China’s housing market tanked?
The money was not ready for the March 12 payment “because the sales recovery situation did not meet expectations and the capital allocation was under pressure,” Country Garden said. “We will give our best efforts during the grace period by pushing sales, revitalising assets and reducing unnecessary administrative expenses.”
Shares of Country Garden in Hong Kong fell 4.9 per cent to HK$0.58, bringing the loss this year to 25 per cent.
China’s housing market crisis has lingered for almost four years, ever since Beijing introduced its “three red lines” policy that shut the industry’s weakest borrowers out of the capital market for funding.
Country Garden reports 85% slump in home sales in fresh alarm for creditors
Country Garden reports 85% slump in home sales in fresh alarm for creditors
The liquidity squeeze has not spared stronger builders either, including Country Garden and China Vanke, as consumers held back purchases during the pandemic. In all, Chinese junk-rated developers have defaulted on at least US$160 billion of bonds since then, Goldman Sachs estimated.
Country Garden, based in Foshan in southern Guangdong province, in January hired advisers to reorganise its offshore debts, after failing to repay a dollar-denominated bond in October last year. Preceding that failure, it reached an agreement with onshore creditors to delay repayments on nine bonds by three years.
Excess supply, weak prices plague China’s housing market amid limited policy aid
Excess supply, weak prices plague China’s housing market amid limited policy aid
The company’s liquidity crunch took a turn for the worse last month, when a creditor filed a petition in Hong Kong to wind it up. A default or liquidation will erode confidence among homebuyers in the developer, once China’s largest in terms of sales, with more than 3,000 projects across the country.
Contracted home sales slumped 85 per cent in February from a year earlier, the steepest drop in at least five years, the company said earlier this month. Last month’s sales of 3.72 billion yuan was just a tenth of the monthly average business over the past four years.
China’s top 100 developers suffered a 60 per cent plunge in contracted sales to 185.9 billion yuan last year, according to data compiled by China Real Estate Information Corporation. They fell at an annual rate of 49 per cent in the first two months this year to 421 billion yuan.